Correlation Between John Hancock and First Trust
Can any of the company-specific risk be diversified away by investing in both John Hancock and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining John Hancock and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Financial and First Trust Specialty, you can compare the effects of market volatilities on John Hancock and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in John Hancock with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and First Trust.
Diversification Opportunities for John Hancock and First Trust
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between John and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty and John Hancock is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on John Hancock Financial are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Specialty has no effect on the direction of John Hancock i.e., John Hancock and First Trust go up and down completely randomly.
Pair Corralation between John Hancock and First Trust
Considering the 90-day investment horizon John Hancock Financial is expected to generate 2.84 times more return on investment than First Trust. However, John Hancock is 2.84 times more volatile than First Trust Specialty. It trades about 0.33 of its potential returns per unit of risk. First Trust Specialty is currently generating about 0.31 per unit of risk. If you would invest 3,409 in John Hancock Financial on August 29, 2024 and sell it today you would earn a total of 518.00 from holding John Hancock Financial or generate 15.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
John Hancock Financial vs. First Trust Specialty
Performance |
| Timeline |
| John Hancock Financial |
| First Trust Specialty |
John Hancock and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and First Trust
The main advantage of trading using opposite John Hancock and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.| John Hancock vs. Gabelli Global Small | John Hancock vs. MFS Investment Grade | John Hancock vs. Eaton Vance National | John Hancock vs. GAMCO Natural Resources |
| First Trust vs. Gabelli Global Small | First Trust vs. MFS Investment Grade | First Trust vs. Eaton Vance National | First Trust vs. GAMCO Natural Resources |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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